How Washington Survives Without a State Income Tax

Unlike other states, we only file one set of taxes come spring—so what fills Washington’s coffers?

By Nicole Pasia April 8, 2020 Published in the April/May 2020 issue of Seattle Met

April 15 has long brought a sinking feeling, and not just because it’s the anniversary of the Titanic’s downing. The deadline to file your tax returns remains an homage to one of life’s unpleasant certainties. But in Washington, we don’t have quite as heavy a lift during tax season as many of our fellow Americans. The state is one of seven that entirely forgoes a state income tax.

So, how does Washington remain above water financially without docking your salary? For decades, the state has leaned on a steep sales tax—currently the fifth highest in the nation—to help fund all those new light rail stations and education initiatives. Property taxes and a business and occupation tax, which levies companies based on revenue, figure prominently too. Altogether, it’s a regressive mix for a progressive state.

Tax Debate: Not for the Faint of Heart
After the Great Depression’s onset, 70 percent of Washington voters approved a new income tax in 1932, in hopes of lowering the state’s property taxes. But the next year, some Washington businessmen opposed its legality. On the day of the case’s hearing at the state supreme court, a heart condition sidelined judge Emmett Parker (top right), leaving the remaining judges at a stalemate: four in favor and four against. While governor Clarence D. Martin quickly appointed a replacement to OK the tax, an ally switched sides; the levy was rejected. A possible motivation for that flipped judge? Legend has it that income tax statements arrived in mailboxes during deliberation.

11: Number of times a Washington state income tax has been put to a vote since 1932. Aside from the first, each failed.

How Companies Pay 

Like residents, Washington businesses get to skip a state income tax. Instead, Washington imposes a “business and occupation” tax based on corporations’ sales or products’ value. Rates vary by industry, with radioactive waste disposal taxed the highest, at 3.3 percent. 

Receipt Regrets

How Our Sales Tax Stacks Up Nationally*

Chicago, Long Beach, and Glendale, California: 10.3 percent (the nation’s highest)
Tacoma: 10.2 percent
Seattle: 10.1 percent
Los Angeles: 9.5 percent
New York: 8.9 percent
San Francisco: 8.5 percent
Denver: 8.3 percent
Boston: 6.3 percent
Washington, D.C.: 6.0 percent
Honolulu: 4.5 percent

*As of 2019

Washington State Tax Revenue By the Numbers

FY2019 Total: $23.1 in billions, excluding local taxes.

► Property: 14.7 percent ($3.4)

► Other: 14.7 percent ($3.4)

► Business and Occupation: 19 percent ($4.4)

► Retail Sales and Use: 51.5 percent ($11.9) 

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